Do you mean he cut and pasted the different images (of the people) into his sig? Or do you simply want to smooth the sig border?
I don't use Paint Shop Pro, but I know Photoshop and GIMP both have a "feather edges" option. He just sets the feathering to 1 or two pixels, cuts and pastes.
If you're wondering how he selected the people out of their respective image in the first place, he either
a) used the Magic Wand tool (the bad way)
b) used levels and channels to separate the person from the background (too much to explain here)
c) used the Path tool (the meticulous, complex way)
d) winged it (the very bad way)
If you mean the latter, use eZakto's way.